New Delhi: Former Indian Prime Minister
Manmohan Singh on Thursday tore into his successor Narendra
Modi's clampdown on the cash economy, calling it an "organised
loot and legalised plunder" of the country.
Singh - the architect of economic reforms that led to years
of rapid growth - dubbed Modi's shock move to scrap 500 and
1,000 rupee banknotes a "monumental mismanagement" that could
shave at least 2 percentage points off economic growth.
The so-called demonetisation drive is part of a crackdown on
corruption, tax evasion and militant financing, but the decision
to suck out 86 percent of cash in circulation threatens to push
Asia's third-largest economy into a liquidity crisis.
Opposition parties led by Congress have stalled parliament,
demanding a reply from Modi and compensation for the families of
dozens of people reported to have died while queuing at banks to
swap old money for new.
Belying his reticent image, Singh launched a broadside on
the Indian leader, urging him to find pragmatic ways to ease the
distress caused by the cash crunch.
"What has been done can erode our people's confidence in the
currency and banking system," said Singh. "In fact, it's a case
of organised loot and legalised plunder."
Modi, citing a survey he launched via a smartphone app, says
that 90 percent of people expressed their support for the ban on
old banknotes. The survey was not representative but drew half a
With a small stock of smaller notes available and people
struggling to get hold of scarce new 500 and 2,000 rupee bills,
consumers are holding back spending and businesses are
Delays in replacing cancelled notes and restrictions on cash
withdrawals "reflect very poorly" on Modi's team, the finance
ministry and the Reserve Bank of India, Singh said.
In the year to March 2017, the cash crunch is expected to
pull down economic growth from last year's 7.6 percent by as
much as 4.1 percentage points, brokerage Ambit Capital reckons.
Moody's Investors Service on Thursday warned the persistent
cash crunch could worsen asset quality at Indian banks.